Author: Mark

I was born in a developing country in Africa (Malawi), and have spent over 15 years living and working outside the UK as a teacher in international schools. I currently live and work in beautiful Brazil, the land of bright sunshine, amazing tropical beaches, dazzling football, eye-wateringly strong caipirinhas, and the sensual rhythm of samba.

Business & Management.

The introduction of your business internal assessment (IA) is very important because it is the first thing that your teacher, and any coursework moderators, will read. Is important, therefore, to make a good impression from the beginning.

Here is a template that I use to help students write their introduction. The advice that I give is start straight away with the business issue, problem or decision that you are investigating. A common mistake is to start your introduction giving a brief description of the company, it´s history etc. Avoid doing this. Only describe or explain your chosen company towards the end of the introduction if you have to. Remember, to keep your introduction brief – about 300 words for a Standard Level IA, and 400 for a Higher Level IA.

Introduction.

Description of problem / issue or decision the business has to make.

What effects are there on the company because of the problem?

Context (background situation).

Why is the problem / issue / decision important for the company?

What may happen to the company if they cannot resolve the problem / cannot make the decision?

He traces the origins of the problem back to 1981 when Jack Welsh, the then CEO of General Electric, coined the term ´maximizing shareholder value´. According to Welsh, this is what companies should do; aim to raise company share prices by increasing profits as much as possible and give as much dividend back as possible to shareholders. Managers were encouraged to do this by having part of their pay in share options. This created what Chang calls ‘an unholy alliance’ (P17) between shareholders and senior executives, both of whom benefit if the share price of their companies rise and rise.

What were the consequences of these policies? According to Chang ” Jobs were ruthlessly cut, many workers were fired and re-hired as non-unionized labour with lower wages and fewer benefits and wage increases were surpressed …. The suppliers and their workers, were also squeezed by continued cuts in procurement prices” (P18). In other words, the other stakeholders in the business lost out.

Another strategy, moreover, aimed at maximizing shareholder value became more and more popular – share buybacks.This is when a company uses it’s own profits to buy back it’s shares in order to artificially increase their value. According to Chang, prior to 1980 share buybacks made up just 5% of US company profit spending, by 2007 this figure had reached 90% and in 2008 just as the economic crisis was taking hold, reached 280% (P20)

These policies, moreover, don’t even make good business sense. Less investment by companies (most of the money is being used to buy back shares or is being given to the shareholders) leads to lower long term productivity. Workers who are forced to accept wage cuts and more temporary or short term contracts, become demoralized and demotivated and consequently productivity falls.

Chang backs up his arguments with some astonishing statistics. Quoting the research of Willam Lazonik, a business economist, he says “…Had GM not spent the $20.4 billion that it did in share buybacks between 1986 and 2002 and put it in the bank (with a 2.5% after tax annual return), it would have had no problem finding the $35 billion that it needed to stave off bankruptcy in 2009” (P20). (GM, the large US automobile manufacturer, went bankrupt in 2009 and had to be bailed out at great expense using taxpayers money by the US government).

On the IB Business course we learn that businesses maximizing their profits is generally a good thing, that the concepts of limited liability and company legal structures such as the public limited company (plc) are positive, useful things for society, and that a good business manager should consider the long term interests of all the stakeholders in the business. However, is the concept of limited liability really good for society, are plc’s and the way they are run nowadays positive for society, and do business managers really take into consideration the long term interests of all the stakeholders in the business?

Some business analysts think not. Ha-Joon Chang, in his popular book ” 23 Things They Don’t Tell You About Capitalism*”, argues that these things have in many ways been bad for society, that the way plc’s have been run over the last few decades has generated more social harm than good and that, in reality, the interests of just two groups of stakeholders – company shareholders and senior executives – have taken precedence above all others.

When capitalism and business as we know it now was in it’s infancy, owning and running a business was much more risky than it is today. If your business went bankrupt and you ended up owing lots of money to creditors you could have lost all of your personal possessions and have been thrown into a debtors prison. Nowadays we have this concept of limited liability whereby you only lose the original amount of money you invested in the business and your personal possessions are protected.

What a lot of people don’t realize, however, is just how controversial the joint stock company (the limited liability company as we now know it) was when it was first invented. Adam Smith, one of the founding fathers of economics and modern capitalism disapproved saying ” The directors of [joint stock companies] … being the managers rather of other people’s money than their own, it cannot well be expected that they would watch over it with the same anxious vigilance with which the partners in a private copartnery [ i.e. partnership with unlimited liability] frequently watch over their own. “(P 13, Chang book). His disapproval of limited liability reflected the current wisdom of the time; people felt that managers of limited liability companies would take greater risks because they were managing companies funded in most part by other people’s money rather than their own. Indeed, when the joint stock company was first invented, only very speculative, risky ventures in the national interest took the form of joint stock companies, such as the Dutch East India Company set up by Holland in 1602.

As countries industrialized, however, and there was more and more of a need for investments in large, expensive investment projects such as railways, steel and chemical plants, limited liability companies became more and more popular. Indeed, this is the main argument for the social usefulness of plc´s as institutional structures – they enable finance to be raised for big, risky investment projects which otherwise would probably not be funded. Nowadays, they are taken for granted as being essential to the modern business world.

* = This is an excellent book which all IB Business and IB Economics students should read. See image below. I will be using it quite a lot in the next few posts I make. You can buy it on Amazon by clicking the link above.

IB Business & Management.

The Coursework Research Question – The Importance of ‘Focus’.

One of the first things that you will have to do when starting your business coursework is to choose a good, well focused research question (r.q.) . If you choose an inappropriate or unfocused r.q., you will be handicapped from the beginning. The word count for the HL coursework is only 2000 words (excluding the Research Question and Research Proposal) and for SL it is only 1500 ( for more general information on the business coursework see this page of my blog). These word counts are short, and for this reason your r.q. must not be too broad. You need to focus on one specific business (or industry) in one country, and analyse one (or possibly two) of it’s problems, strategies or decisions. See the diagram below:-

Increasingly Focused Research Question.

The above diagram illustrates some possible research questions, and their levels of focus, from unfocused at the top to much more focused on the bottom.

As you can see from the r.q. at the bottom, it looks at just one company, in one country, focusing on just one strategy. Indeed, rather than looking at just the ‘marketing strategy ( which potentially is a very broad strategy that includes a number of things such as ‘pricing’, ‘promotion’, ‘product’ and ‘place’, see the r.q. second from bottom ) it just focuses on just one of these – promotion.

Keep following this blog for more posts on the IB Business coursework.

IB Business & Management.

The Key Concepts – The New Syllabus for Examinations Starting In May 2016.

The teaching of the new syllabus should be based around three elements; the course content (the syllabus), contexts (the companies that you study throughout the course, whether they be related to your Internal Assessment, an Extended Essay, case studies that you have done in class, a company that you are familiar with) and the key concepts. See the following diagram: –

The Three Elements of the Course.

Course Key Concepts *

Change

A famous adage in business is that if a business does not adapt to the changing external environment, then it will die.

Change is constantly happening, whether it be in consumer tastes, fashion, technology, culture, globalization, the external economic and social environments and the competition. Businesses are therefore having to adapt their organization, structures, aims and strategies accordingly.

One feature of the modern world is that change is accelerating.

Culture

The attitudes and values held by people in an organization which determine the norms, ways of thinking, courses of action and behavior of individuals in that organization.

Businesses are located in certain countries and geographical regions, which possess their own unique cultures, attitudes and ways of doing things. However, due to globalization, these cultures are becoming increasingly interconnected and mixed up.

Globalization

The increasing inter-connectedness of the world, economically, politically, socially, culturally and technologically.

How businesses are increasingly selling their products, locating, conducting marketing campaigns, sourcing their finances, recruiting staff, worldwide, rather than just in their home countries.

Ethics

Relates to the decisions individuals, stakeholders and organizations make and whether they are morally right or wrong.

Innovation

In order for a business to survive, they need to innovate. This involves coming up with new ways of doing things, whether it be producing a new good or service, creating a a new production method, a new technology, a new distribution system, or a new marketing strategy. Businesses that don’t innovate cannot compete and eventually go bankrupt.

Strategy

A plan of action, usually formulated by the senior managers of a company, aimed at reaching certain goals or objectives in the future.

Your teacher should include all of these elements throughout the teaching program. These concepts are tested on Paper 2, Section C, of the final exam.More information will be provided about how to approach this question.

*= these are my definitions / explanations of the key concepts. You may find others that are different.

IB Economics.

The Similarities and Differences Between South Africa and Brazil.

I am spending the holiday in South Africa at the moment so thought that I would do a post on South Africa and Brazil.

When I started studying economics all those years ago we used the terms ‘ the First World’, the ‘ Second World’ and the ‘ Third World’ – meaning the rich countries, the Soviet Bloc countries and the poor countries of the world. However, the phrase ‘ Third World’ implies that all the poor countries are lumped into one block and are the same. Not true.

One of the most difficult things about development economics ( and for the politicians and government bureaucrats that try and ‘manage’ the development of a country) is that every county is different – they have different histories, different resource endowments, different cultures, different political systems, different climates, different languages and different social institutions.

Each country therefore faces it’s own unique problems that require their own unique solutions.

Here are the similarities between Brazil and South Africa ( SA) :-

Both are middle income countries – $ 6617 GDP per capita for SA in 2013, and $ 11208 for Brazil.

They are regarded as the industrial power hubs of their two continents

Both have been classified as BRICS

Both rely on the extraction and export of raw materials

Both have been suffering from falling economic growth recently because of the slowdown in the growth of China and the fall in raw material prices

Both countries currencies have depreciated a lot recently

Colonization – Brazil by the Portuguese, South Africa by the Dutch and the British, are common to both countries.

Both are located in the Southern Hemisphere

Both countries became truly democratic relatively recently ( see below)

A strong African culture exists in both countries – in the case of Brazil due to slavery

Extreme inequality of income and wealth, as shown by the shanty towns of SA and the favela’s of Brazil, are features of both countries.

South Africa’s experience of colonialism was longer and much more traumatic for the country, due to the racist system of ‘ Apartheid ‘ – the forcible separation of races and cultures in the country. Apartheid only ended in 1994.

South Africa’s peoples and cultures are more diverse than Brazil’s – SA has eleven official languages!

Brazil’s population is much bigger than SA’s – 250 million verses 53 million

Brazil is a much bigger country than SA

SA, arguably, has a better infrastructure than Brazil.

This thirteen minute video is about the life of Nelson Mandela, one of the greatest leaders of the 20th Century, and the man largely responsible for ending Apartheid in South Africa.

IB Economics.

Are diagram labels, axes labels and diagram titles included in the word count?. No. But diagram descriptions / explanations are.

Can I put line graphs, bar charts or pie charts in my commentary? No, not unless there is one already in the article. If there is one, just talk about it in the commentary, don’t reproduce it.

Must you include a bibliography at the end? No. Only include footnotes at the bottom of each page which reference your sources. Bibliographies at the end are not needed.

Can I use an article in a language that is not English? Yes, but provide a translation.

Can I use economics diagrams that are copied and pasted from the internet? Yes, provided you reference their source as a footnote at the bottom of the page.

Can I put definitions of specialist economic terms in the footnotes? No, they must go in the main body.

Can I quote from the article? Yes, but don’t do it too much because it uses up a lot of your word count. Indeed, I would only do it once, and then if you want to refer to another line or paragraph in the article write (L3) or (P4) at the end of the sentence. This saves your word count.

Can I write more than three commentaries and then just submit the best three? Theoretically yes, providing your teacher agrees with this.

IB Economics.

If you want top grades in your coursework, you need to be able to prove skills of analysis, synthesis and evaluation. Commentaries that just describe or restate the information in the article, tend to get low marks. These skills are difficult to do and take time and practice to acquire.

What is analysis? When you analyze something, you look at it in a lot of detail, you break it down into it’s component parts and try and make links or connections between the different parts.

What is synthesis? A summary of the available information that you have – describing or explaining a complex thing in a shorter, more easily understood way.

Evaluation involves looking at something in a critical way and coming up with your own opinion on it, backed up by sufficient evidence.

All of the above skills are difficult to do, but evaluation is probably the hardest. What could you evaluate in your commentary?

An economic situation, policy or strategy.

Economic data

Economic theories

How can you do this when writing your commentary?

Critically assess the article. Is it biased? Does the writer leave out important information that you think should be included? Are the writer’s conclusions appropriate?

What are the advantages / disadvantages of the policies outlined in the article? What are the most important advantages and the most important disadvantages?

What are the short and long-term consequences of the economic strategies outlined in the article? Which groups (stakeholders) in the economy benefit and why? Which lose out and why?

What are the causes of the economic situation / consequences of the economic policies outlined in the article? Which are the most important causes and consequences and why? What are the remedies?

If there is data in the article, is it appropriate, reliable, relevant and accurate?

When using an economic theory, demonstrate a critical awareness of the theory. Explain the assumptions behind the theory. Are the assumptions realistic? Is the theory relevant and appropriate to the economic situation outlined in the article?

You should analyze, synthesize and evaluate throughout your commentary, but the evaluation should probably occur more towards the end of your commentary, just before your concluding paragraph (see the commentary structure diagram in Step Three – Writing Up Your Commentary ). In your concluding paragraph, you express your opinion, which finalizes your evaluation in the commentary.